Sunday Read: Presidents’ Day
Throughout American history, whistleblower laws have emerged as a method for increasing accountability among both private sector actors and the civil service. Various Presidents, having observed instances of dishonesty, realized that whistleblowers were and are essential tools to preventing fraud and under the right circumstances could be enticed to come forward.
This week, in recognition of Presidents’ Day, we look at times when past presidents have taken steps to advance whistleblower policies. These examples serve as the template for how President Biden can implement crucial whistleblower reforms, cementing his own legacy by protecting the best weapon the government has in the fight against fraud and corruption.
President Abraham Lincoln
By the time President Abraham Lincoln signed the original False Claims Act (FCA) in 1863, the Union Army was burdened with broken munitions, sick horses, and rotten food. The supply chain was rife with contractors abusing the wartime chaos to sell subpar goods, including broken rifles and spoiled rations. The waste and danger of such fraudulent government contracts undermined the Union Army’s ability to successfully combat the Confederacy.
Also referred to as the “Lincoln Law”, the FCA allows civilians to file lawsuits against fraudulent contractors in U.S. District Court on behalf of the federal government. The first whistleblower to file a claim, typically an employee of the contractor, can receive 15–30% of the money recovered.
This provision acts as one of the United States’ most important whistleblower laws, as it incentivizes whistleblowers to come forward to report fraud that the government might have never otherwise discovered. NWC will be celebrating 159 years of the False Claims Act on March 2nd. RSVP for the event here.
Presidents McKinley and Nixon
Environmental violations are a major aspect of whistleblower claims. Both the Lacey Act, signed in 1900 by President William McKinley, and the Endangered Species Act, signed in 1973 by President Richard Nixon, have provisions that provide monetary rewards to whistleblowers that provide information leading to successful enforcement under these laws.
With these laws serving as some of the most steadfast legal protections for the conservation of land and wildlife, the clever addition of whistleblower protections has helped the government unearth corruption and fraud that has damaged the environment. Congress is currently considering laws to improve protections for wildlife whistleblowers, including the Wildlife Conservation and Anti-Trafficking Act. Pledge your support for Wildlife Whistleblowers today to receive updates.
President Barack Obama
Over the years, amendments to the FCA were passed in response to steep rises in wartime fraud, with changes being made during World War II and the Cold War. Rapid increases in defense spending create ripe opportunities for fraudulent contractors to submit bogus claims, taking advantage of the situation for profit. However, President Barack Obama revitalized the utility of the FCA when he signed the Fraud Enforcement Recovery Act (FERA) in 2009.
FERA widened the definition of a viable whistleblower claim to allow suits against entities that indirectly receive government money. It also made it illegal for companies to harbor money from government overpayments. This opened the door for a sharp rise in healthcare fraud cases being filed under the FCA, as it is common for providers to bill the government for healthcare services that were never provided or medically unnecessary.
The Food and Drug Administration has stated that the FCA and its amendments under FERA were instrumental in taking action against fraudulent medical providers. Pharmaceutical manufacturer GlaxoSmithKline paid almost $3 billion in fines after a quality assurance manager named Cheryl Eckard filed an FCA whistleblower claim revealing it produced drugs in a non-sterile environment. These drugs included treatments for diabetes, nausea, depression, and even antibiotic ointment for babies.
Preventing whistleblower retaliation
These Presidents, through the landmark whistleblower legislation they championed, helped create the legal tools that whistleblowers can use to stop fraud and corruption. These policies have helped reveal some of the most egregious instances of financial, environmental, and healthcare fraud — leaving a legacy that far outlasts each individual Administration or President.
President Biden has the opportunity to join them:
- The Merit Systems Protection Board (MSBP), a quasi-judicial agency tasked with protecting federal employees from discrimination and whistleblower retaliation, has been without a quorum for over five years. It currently has no members on its board whatsoever, rendering it unable to process the massive backlog of more than 3,400 claims from federal employees. If the President is committed to protecting whistleblowers from illegal retaliation, it is crucial that his MSBP nominees get through the Senate confirmation process as soon as possible. Federal employees are robbed of their much-deserved protections every day the MSPB lacks a quorum.
- Many whistleblowers face retaliation that is difficult to litigate due to lack of enforceable protections. IRS whistleblowers, as well as whistleblowers from the Anti-Money Laundering program, lack sufficient protections. AML whistleblowers reporting banking violations are not protected from retaliation if they report to a FDIC-insured institution. President Biden must express his support for shoring up these shortcomings and enshrining the improvements in whistleblower protections proposed in the bipartisan IRS Whistleblower Program Improvement Act.
- The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have their own extremely successful whistleblower programs that regularly root out financial fraud, but this success has made the limited funding pools for whistleblower rewards insufficient, resulting in long delays issuing rewards. Although Congress has repeatedly issued temporary funding to keep these programs afloat, President Biden should urge Congress to pass long term funding for these programs, ensuring the government’s ability to investigate financial and the whistleblowers ability to be rewarded.
- The Federal Trade Commission and Consumer Financial Protection Bureau both lack whistleblower rewards programs. This is a significant oversight, as these agencies are the main sources of antitrust and consumer protection enforcement that targets price-fixing and corporate fraud scandals that defraud ordinary consumers. It is paramount that President Biden work with Congress to establish these programs.
Despite the slow progress towards improved whistleblower protections, there are still serious inadequacies in current policy where whistleblowers remain vulnerable to retaliation. There are insufficient systems in place to investigate and ban retaliation, inadequate or nonexistent whistleblower rewards programs at important agencies, and a distinct lack of long-term commitment to impose large fines against fraudsters.
President Biden must support these policies to create a lasting legacy of improved government accountability, as several presidents before him have done. These recommendations will go a long way toward preventing the misuse of taxpayer money, protecting Americans from scams and fraudulent products, and rooting out corruption. To celebrate President’s Day, NWC is sending a message to President Biden: make history and cement your legacy as the whistleblower President.
This story was researched and drafted by NWC Intern Harshita Bondhi, a Political Science major at the University of California, Davis.
